Will Health Care Reform Fall Short?

The administration wants a bill that can pass Congress. But what will it actually contain?

For now, it seems increasingly likely that the "public option" could be access to the Federal Employee Health Benefits program. This is something Obama talked about on the campaign trail, and, according to Government Executive, his officials studied the plan closely earlier this year. Senate Finance chair Max Baucus (D-Mont.) has long hinted that the FEHB might provide the "compromise" that would allow bipartisan support.

However, while the FEHB covers millions of public employees, it is in no way a public plan. It simply allows federal workers to sort through dozens of different plans and pick one they want. Their employer, the government, then picks up around 70 percent of the tab, with the worker paying the rest. The coverage is generally good: It encompasses preexisting conditions, caps out-of-pocket expenses, and gives subscribers clear information to help them find the best plan for the needs. But it is not cheap. One hundred thousand federal workers don't participate because they can't afford the premiums.

Jim Jaffe, a former congressional staffer who worked on economic, tax, and health issues, and an FEHB subscriber, explained in a recent post Health Beat blog that the plans offered under the FEHB "differ little from insurance plans offered by other large employers." In particular, he writes, the plans "are not particularly user friendly or structured for efficiency," with enrollees facing many of the same complications and obstacles that they would encounter with private insurance. Jaffe concludes that the FEHB plan would be better than nothing, but "from an economic perspective, they are more problem than solution. Premiums regularly rise at a rate double inflation." Expanding access to the FEHB is far inferior to another incremental strategy for a public option, which is to open up Medicare or something like it to the wider population. Medicare, for all its flaws, is basically a single-payer system.

Obama has said that the public option must "inject competition into the health care market so that it forces waste out of the system and keeps the insurance companies honest." The FEHB wouldn't meet that standard. It might, however, be a victory for the Heritage Foundation, especially its chief of domestic policy, Stuart Butler, a Thatcherite Brit who advanced this idea back in the early days of the Reagan administration.

Sen. Kent Conrad, the North Dakota Democrat who chairs the Budget Committee, has advanced another compromise that he believes can win backing from Republicans and conservative Democrats where the public option cannot: health care co-ops. This proposal would establish a network of non-profit organizations that offer an alternative to private insurers. Instead of being controlled by the government, however, they would be run by boards of patients who are elected by fellow consumers. Again, it’s not clear that this scheme would bring about significant savings for patients or fix the inefficiencies that abound in the current system. In an interview with Kaiser Health News, Pam MacEwan, the executive vice president of a co-op called Group Health, admitted that its rates were similar to private insurers and its payment structures were also "pretty much" the same.

In other words, some of the leading public options under consideration may not be all that public. Will Obama allow his health care push to fall short by embracing such measures?